Global Policy Forum

'Rightsizing' the IMF, the World Bank and the WTO


By Robert Naiman

Center for Economic and Policy Research
June 2000

The Seattle Revolt

In considering the issue of how labor and environmental standards should be dealt with in international trade agreements, let us remember the tremendous social progress represented by the collapse of the WTO talks in Seattle. This collapse was the achievement of a worldwide revolt against the framework of "corporate globalization." This revolt was manifested not only in the street protests and mass civil disobedience outside the convention hall, but also inside the WTO meeting, as delegates from around the world facing greater popular pressure back home refused to cave in to the claim that there had to be an agreement, no matter what. The degree to which the dispute over how the WTO should handle these issues contributed to the collapse of the WTO talks has certainly been overstated, perhaps deliberately so, but to the extent that the dispute contributed to the collapse of the talks it was certainly a good thing, since the collapse of the talks was the best likely outcome. An international coalition of organizations had united in opposition to any "Millennium Round" of WTO negotiations[i] – and remarkably, this coalition has so far been successful.

There is now a substantial body of opinion, in both the South and the North, that the creation of the WTO was a mistake; that the WTO, like the International Monetary Fund and the World Bank, is incapable of meaningful reform and should be abolished at the first available opportunity; and that efforts to reform the WTO should focus on blocking its expansion and stripping it of its power, whether internationally by agreement, or nationally by increasing defiance of WTO rules and mandates.

The Challenge to WTO Authority

Skepticism about giving the WTO the authority to adjudicate violations of labor rights is certainly warranted, given the WTO's history as a secretive institution dominated by Northern corporate interests. However, the status quo is that these issues are already linked in the WTO and elsewhere. The record of WTO dispute panels is a record of linkage. The WTO has overruled and pre-empted laws and regulations in many countries designed to protect workers' rights, the environment, or public health. If one agrees that the WTO is "not the place to deal with the environment and labor rights," then all decisions of WTO panels with respect to environmental and labor regulations should be overturned and the WTO should be barred from interfering with such regulations in the future. The question is not whether there will be linkage, but what form of linkage we will have.[ii]

Certainly the International Labor Organization should be strengthened. A critical step to strengthening the ILO is to remove the power of the WTO to block enforcement of ILO conventions.[iii] Currently, an attempt to actually enforce ILO conventions – e.g., by barring the import of goods produced by child labor – could be ruled WTO-illegal. Burma today is all but expelled from the ILO[iv], its widespread use of forced labor documented by the ILO and others. But today any WTO member barring Burmese goods could face sanction from the WTO.

Developing countries – post-colonial countries – should not be held to the same standards as developed countries. But they should be held to some standards, especially for goods that are exported to developed country markets, often by corporations based in developed countries. Today there are effectively no standards. If people in a country democratically decide that they wish to produce for their own consumption through the use of child labor, and violate no international agreement to do so, and if no foreign corporations or investors are involved in such production, there may be little that anyone outside of that country has to say about it. But if such a country produces such goods for export, it is a different story. Consumers have rights, and they have obligations. If a consumer thinks that children should be in schools and not in factories, she has an obligation to avoid purchasing goods produced by children. This includes an obligation to support laws barring the import of such goods. And if foreign producers face lower standards for production to a given market, this will simply serve to undermine the standards for products in that market.

One should not assume that the minimal standards on trade under discussion – respect for "core labor standards" as defined by the ILO – would displace much production from the South. It is far more likely that the imposition of such standards will replace some labor from the South with other labor from the South, e.g. replace child workers in Southern countries with adult workers in Southern countries.[v]

Some "free trade" proponents claim that increasing attention to living standards and the environment will follow automatically from rising incomes brought about by market forces. This economic determinism contradicts the political history of industrialized societies. Such labor and environmental standards as exist in industrialized countries were won only through protracted social struggle.[vi] The great attraction of the WTO and the other forces that dominate the global economy to multinational corporations is precisely their capacity to undermine such standards.[vii]

Negotiating Better Standards

Negotiations in the multilateral trading system are a reciprocal affair. We would not expect postcolonial countries to accept voluntarily enforcement of labor and environmental rights through trade restrictions without getting something in return. Northern NGOs should support a rollback of all WTO provisions damaging to the South, including repeal of the TRIPS ("Trade Related Aspects of Intellectual Property") agreement, and exemption for the South from any provisions of the WTO or other agreements that impinge on food security or the ability to protect infant industries from multinational corporations. In the absence of repeal or exemption, Northern NGOs should support efforts by Southern governments to resist the implementation of such agreements, as well as efforts to resist bullying by Northern corporations and Northern governments in related policies (as AIDS activists in the U.S. did when they disrupted campaign appearances by Vice-President Gore to defend South Africa's Medicines Law.[viii])

Indeed, there is a fair charge to be leveled at non-governmental organizations in the North: from the point of view of the South, the WTO is simply one head of the hydra, arguably far from the fiercest one. Northern governments can withdraw from the WTO tomorrow and pursue different policies. Southern governments and peoples have to contend with the International Monetary Fund, the World Bank and other multilateral development banks, Western military interventions, Western corporations and destructive "economic aid."[ix]

Institutional Reform

So if we truly wish to reform the global economy, and restore the ability of nations in the South to pursue economic and social policies that are in the interest of the majority, we must take on the other heads of the hydra. Concrete reforms would be to:

End IMF-World Bank "structural" and "sectoral" adjustment policies. Compel the IMF and the World Bank to cancel debts owed by postcolonial countries. Reduce the role of the IMF to mere collection and dissemination of information. Reduce the resources available to the IMF accordingly. Convert World Bank loans to grants. Limit the size of World Bank projects. End government support for World Bank borrowing. Boycott World Bank bonds, the source of 80% of the Bank's capital.[x] Establish an international bankruptcy procedure, with open proceedings and at least equal representation from the South.

Seek pledges and legislation in the North barring any military intervention in the South that alters the economic policies of Southern governments. End military lending to the South.

End destructive " economic aid," including linked aid and food aid that undermines Southern farmers and fosters dependency on food imports. Require Southern public oversight over all aid and lending programs. Limit food aid to the difference between a country's agricultural productive capacity and its consumption needs.

These steps will not occur overnight. But campaigning for these reforms will open greater space for postcolonial countries to pursue independent economic policies in the interests of the majority.


[i] See, e.g., "Statement from Members of International Civil Society Opposing a Millennium Round or a New Round of Comprehensive Trade Negotiations," signed by more than 1400 organizations from 89 countries, available at

[ii] See "Whose Trade Organization? Corporate Globalization and the Erosion of Democracy" (Public Citizen, 1999) for a detailed account of the most controversial rulings of the WTO dispute resolution panels.

[iii] Indeed, in 1994-95 there was a vigorous discussion of the enforcement of ILO "core labor standards" through a "social clause" – the collapse of this process suggests that the sticking point was not the question of where the discussion of labor standards should take place – i.e. the ILO or the WTO – but whether such standards would actually be enforced. See, for example, "ILO suspends talks on social clause," Ahirudin Attan, Business Times (Malaysia), May 3, 1995.

[iv] "ILO bars Burma over forced labour," Frances Williams, Financial Times (London), June 18, 1999.

[v] As a result of IMF-World Bank mandates that Mozambique abandon export tariffs on unprocessed raw cashew nuts, 10,000 adult women lost their jobs in Mozambique's cashew nut processing factories. This shifted production to children in India who shell the nuts by hand at home, a fact acknowledged by the World Bank. See "Mozambique gains an extra $28 million per year from HIPC," Jubilee 2000 Coalition (UK),

[vi] For example, more than 100 years passed in the United States between the first strikes and demonstrations demanding to limit the working day and the passage of national legislation that did so, during which time movements to limit the working day were often brutally suppressed.

[vii] Among many examples, 40% of executives of major U.S. corporations polled by the Wall Street Journal before the passage of NAFTA said they would likely move production to Mexico and 24% said they would use NAFTA as a "bargaining chip" to keep U.S. wages down if NAFTA were passed (cited in "One America," Bob Davis, Wall Street Journal, September 24, 1992.) A study commissioned by NAFTA's Commission for Labor Cooperation found that threats of plant relocations to Mexico by companies against workers trying to organize unions increased under NAFTA and the rate at which such threats were carried out tripled under NAFTA, although such actions are clear violations of U.S. labor law. "Final Report: The Effects of Plant Closing or Threat of Plant Closing on the Right of Workers to Organize," Kate Bronfenbrenner, Cornell University, September 1996.

[viii] For a comprehensive account of how AIDS activists defeated the U.S. pharmaceutical industry on "an obscure trade issue," see the Consumer Project on Technology's web page, "US Policy toward South Africa and access to pharmaceutical drugs,"

[ix] Among many examples of the intersection of the "enforcement mechanisms," the exiled, democratically elected government of Haiti was compelled to sign a letter of intent to implement IMF structural adjustment policies as a condition of U.S. support for reversal of the military coup in Haiti – a coup carried out by officers employed by the U.S. Central Intelligence Agency. Later, USAID cut off funding to the Haitian government to force it to comply with a World Bank-mandated "fire-sale" privatization plan. See "Democracy Undermined, Economic Justice Denied: Structural Adjustment and the AID Juggernaut in Haiti," Lisa McGowan, The Development Group for Alternative Policies, January 1997.

[x] For more information on the international campaign to boycott World Bank bonds, see

More Information on the World Trade Organization

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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.